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Pentagon: 'Huawei is too close to the government'

Key Points
  • As the Trump administration works to isolate Chinese tech firm Huawei from developing a larger foothold in U.S. partner countries, acting Defense Secretary Pat Shanahan doubles down on U.S. concerns during a week-long trip through Asia.
  • "Huawei is too close to the government," Shanahan says during the IISS Shangri-la Dialogue in Singapore.
  • U.S. officials have long complained that Chinese intellectual property theft has cost the economy billions of dollars in revenue and thousands of jobs and that it threatens national security.
Acting US Secretary of Defense Patrick Michael Shanahan talks during bilateral meeting at Ministry of Defense in Jakarta, Indonesia on May 30, 2019. This meeting talks on cooperation on defense through trade and arms transfer, an underwater survey on shipwrecks military remains on Indonesian water, Indo-Pacific through ASEAN cooperation, conflict solution for the South China Sea. (Photo by Anton Raharjo/Anadolu Agency/Getty Images)
Anton Raharjo | Anadolu Agency | Getty Images

TOKYO — As the Trump administration works to isolate Chinese tech firm Huawei from developing a larger foothold in U.S. partner countries, acting Defense Secretary Pat Shanahan doubled down on U.S. concerns during a week-long trip through Asia.

"Huawei is too close to the government," Shanahan said last week during the IISS Shangri-la Dialogue in Singapore, adding that Washington remains concerned sharing intelligence with partners on networks underpinned by Chinese technology.

U.S. officials have long complained that Chinese intellectual property theft has cost the economy billions of dollars in revenue and thousands of jobs and that it threatens national security. China maintains that it does not engage in intellectual property theft.

Shanahan's comments follow Beijing's move to raise tariffs on $60 billion in U.S. goods, upping the ante in the ongoing tit-for-tat trade war. Trade talks collapsed in May, with intellectual property theft proving to be a major sticking point between the two parties.

Gen. Joseph Dunford, chairman of the Joint Chiefs of Staff, has previously said that if U.S. allies proceed with Huawei's equipment, intelligence cooperation could be undermined.

"One of the things that underlines an alliance is the ability to share information, and when we share information with allies and partners we have to have common standards of information assurance," Dunford told a House Appropriations subcommittee last month. "We have to be sure that our secrets are protected, whether it be intelligence or technology transfer."

Echoing Dunford's sentiments, Shanahan told lawmakers at the hearing that "China aims to steal its way to a China-controlled global technological infrastructure, including 5G."

"Huawei exemplifies the Chinese Communist Party's systemic, organized and state-driven approach to achieve global leadership in advanced technology," he said.

Last year, the Pentagon halted sales of Huawei and ZTE mobile phones and modems on military bases around the world due to potential security risks.

"These devices may pose an unacceptable risk to the department's personnel and mission," wrote Pentagon spokesman Lt. Col. Dave Eastburn. The Pentagon reaffirmed Friday its policy on banning the devices still stands.

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Since 2012, the U.S. government has warned against using Huawei equipment and component parts, alongside one of Huawei's Chinese competitors, ZTE. The company has been effectively banned since that time, and Trump's recent executive order made the recommendations official.

"U.S. government systems should not include Huawei or ZTE equipment," a 2012 report by the Permanent Select Committee on Intelligence said.

"Similarly, government contractors, particularly those working on contracts for sensitive U.S. system, should exclude ZTE or Huawei equipment from their systems."

The Department of Justice is awaiting the extradition hearing of Huawei's CFO, who is accused of fraud related to sales of the company's equipment to Iran in violation of U.S. sanctions. CFO Meng Wanzhou, who is the daughter of Huawei's CEO, is currently out on bail in Canada.

Separately, Huawei is facing a court case in Washington state over allegations the company conspired to steal trade secrets from T-Mobile's U.S. unit for a robotic system used to test smart phones.

Read more: Huawei USA security chief suggests the company could be open to 'mitigation measures' to address US national security concerns

As for Huawei's alleged ties to the Beijing government, the company has strongly denied the accusations. The 2012 report and subsequent intelligence briefings on Huawei do not outline specific proof of Huawei's ties to Beijing, but assert the risk of allowing Huawei to supply this critical equipment is too great. Huawei officials have said they have repeatedly asked the Department of Defense to allow the company to submit to a risk mitigation process, but no agreement has ever been discussed.

"The task of finding and eliminating every significant vulnerability from a complex product is monumental," the report reads. "If we consider flaws intentionally inserted by a determined and clever insider, the task becomes virtually impossible."

— Kate Fazzini contributed to this report from CNBC's global headquarters in Englewood Cliffs, New Jersey

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